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Facebook Q3-2012 Concall: On Revenue, New Launches, ARPU & Mobile Monetization


Facebook reported revenues of $1.26 billion for the quarter ended 30th september 2012, up by 7% from its Q2 2012 revenue of $1.18 billion and up by 32% from the $954 million in revenue reported in Q3 2011. Here are some notes from the Facebook’s first Investor conference call:

Number of Users: Mark Zuckerberg, Facebook CEO said that Facebook ended the quarter with 1.01 billion monthly active users (MAUs), up % from 955 million MAUs from the previous quarter and a 26% YoY increase. Daily active users (DAUs) were at 584  million on average for the quarter, up 5.8% from 552 million DAUs in the previous quarter and a 28% increase YoY from 457 million DAUs in the same quarter last year.

Mobile MAUs were 604 million during the quarter, up 11.23% from 543 million MAUs in the previous quarter and an increase of 61% YoY from 376 million MAUs in the same quarter last year. Zuckerberg said that Facebook witnessed an increase in the number of users from all key countries during the quarter with Brazil, India and Japan being key contributors to their growth in daily users.

- On Facebook as a platform: Facebook CEO, Mark Zuckerberg talked about the company;s three pillar strategy – building a ubiquitous mobile product, building a platform so that every new app that gets created can be social and enable people to share and building a strong monetization and economic engine.

He mentioned that people on mobile are already more engaged than people on desktop and that mobile users are 70% more likely to use Facebook daily, compared to desktop users where there’s only a 40% likelihood of using Facebook on a given day. Zuckerberg said that since the release of its new faster iOS app, it has seen an 80% increase in iOS News Feed loads and more than 20% increase in iOS engagement in terms of likes and comments. He said that Facebook hasn’t released the rewritten Android app yet, but it has many more updates on the way.

- Ad Revenues: Facebook reported advertising revenue of $1.09 billion, a 36% YoY increase. Facebook’s total revenue was $1.26 billion, so this is a large chunk. To create more ‘tailored’ ad experiences, Facebook has made specific product teams responsible for the advertising experience within each of their products.

- Payment Revenues: Facebook generated payment revenue of $176 million, up 13% from last year but down 9% compared to the second quarter, driven by a decline in payments from Zynga. Payments revenue from non-Zynga developers in aggregate continued to grow from Q2 to Q3. In Q3, Zynga represented 43% of Facebook’s Payments revenue, down from 51% in Q2 and 62% in Q3 last year. Zynga comprised 7% of Facebook’s total revenue in the quarter, down from 10% in Q2 and 12% in Q3 last year. Global ARPU (Average Revenue Per User) stood at $1.29 for the quarter and ARPU increased by double-digit rates in North America, Asia and rest of world with an exception of Europe.

- New Launches: Facebook launched Custom Audiences, which helps marketers use their customer lists or other data to target Facebook ads in a privacy-protected way. It also expanded the rollout of FBX, the Facebook Exchange, which allows businesses to bid on specific impressions in real time. Facebook offers, which were reintroduced, were also doing well with approximately 100,000 pages being created and approximately 30% of offer claims coming from mobile devices, since their launch. Facebook also launched Promoted Posts, which allows turning any page post into an ad. Since launching in Q2, Facebook said that it has seen promoted posts from over 300,000 pages, over 25% of which were new advertisers to Facebook. It also launched Gifts, allowing users to send physical gifts.

- Monetising Mobile offering: Zuckerberg informed that after just six months of ramping up its mobile ad business,Facebook was able to make $150 million or 14% of its ad revenue from mobile. He said that he believes that over the long run the company is going to see more monetization per time spent on mobile than on desktop, and that ads needed to be high quality and integrated into the experience rather than off to the side, for successful monetisation in mobile.  The company also rolled out Mobile App-Installs, which is an advertising product for providing distribution for developers.

- On gaming: Zuckerberg was not too happy with gaming on Facebook. Facebook’s Payments revenue from Zynga decreased by 20% this quarter compared to last year. However, Facebook’s monthly Payments revenue from the rest of the ecosystem increased 40% over the past year since Payments has been adopted.

- On Instagram: When Facebook agreed to acquire Instagram, it had 27 million registered users which have now grown to 100 million, said Zuckerberg. He cited comScore reports saying that there’s more mobile time spent on Instagram than on Twitter in the US. He said that Facebook can give Instagram access to some of the tools it internally uses at Facebook, allowing them to grow faster.

Facebook has also released its quarterly report for its third quarter. Here are some highlights from the report:

- User base across geographies: Facebook stated that users in Brazil, India, and Indonesia represented the key sources of growth in its user base during the quarter. The social networking giant had 65 million MAUs (Monthly Average Users) in India as of september 30, 2012, a 10.17% increase from 59 million MAUs in June and a 62% increase from the same period last year. It had 61 million MAUs in Brazil as of September 30, 2012, a 109% increase from the same period in 2011;  and 171 million MAUs in the United States, an 8% increase from the same period in 2011. It reported 1.01 billion MAUs for the period.

Mobile Only Usage: Worldwide mobile MAUs increased by 61% from 376 million as of September 30, 2011 to 604 million as of September 30, 2012Facebook stated that out of the total Mobile MAUs, around 126 million MAUs accessed Facebook solely through mobile apps or their mobile website as of September 30, 2012, an increase of 24%; and the remaining 478 million MAUs accessed Facebook from both personal computers and mobile devices during this period. The company anticipates that the rate of growth in mobile usage will exceed the growth in usage through personal computers in the future and that the usage through personal computers may be flat or continue to decline in certain markets, including the United States, in part due to its focus on developing mobile products to encourage mobile usage of Facebook.

False Accounts: Facebook had stated in its last earnings report that approximately 4.8% of its 955 million user base were duplicate accounts, 2.4% were user-misclassified accounts i.e. users have created personal profiles for a business, organization, or non-human entity such as pets rather than pages and 1.5% were undesirable accounts i.e. user profiles that are intended to be used for purposes like spamming, which violate Facebook’s terms of service. Facebook noted that the percentage of false or duplicate accounts was lower in developed markets such as the United States or Australia and higher in developing markets such as Indonesia and Turkey, based on an internal sample review of limited number of accounts. It did not update this information in this quarter’s report but said that it was continually seeking to improve its ability to identify duplicate or false accounts and estimate the total number of such accounts, and that such estimates may be affected by improvements or changes in its methodology.

Revenue from Zynga: Facebook said that Zynga’s contribution to its payments and other fees revenue has decreased over time and this trend may continue. It derived 7% of its revenues from Zynga in Q3 2012, a 7% decrease from 14% in the previous quarter.

The percentage of the total revenue generated from Zynga in the third quarter of 2012 continued to decline compared to prior periods in 2012, and this trend of Zynga’s revenue contribution declining as a percentage of Facebook’s total revenue may continue, according to Facebook. In June 2012, Facebook also started displaying personalized ads and sponsored stories on Zynga.com as per the developer addendums announced last year, but it does not currently generate meaningful revenue from these ads. 

Presentation (pdf) | Conference Call Transcript – Courtesy Seeking Alpha

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